KEY TAKEAWAYS
- Collections on federal student loans resumed at the beginning of May.
- Since then, the Treasury and Education Departments have collected almost $100 million.
- Many defaulted borrowers were placed in loan consolidation and rehabilitation, while some tax returns were withheld.
The Department of the Treasury is off to a strong start after resuming collection efforts of defaulted federal student loans at the beginning of May.
Secretary of the Department of Education Linda McMahon said in a budget hearing with the House Appropriations Committee on Wednesday that since collection efforts resumed, they have collected almost $100 million in loans.
The Treasury has not collected on loans in almost five years since payments were paused during the COVID-19 pandemic. Now, about 10 million borrowers have defaulted or are in late-stage delinquency, the Department of Education said.
Earlier this month, the Department of Education started communicating with defaulted borrowers, offering them ways to get back into good standing, such as loan consolidation and loan rehabilitation.
McMahon said last week that the Treasury has begun garnishing the wages of defaulted borrowers, starting by withholding tax refunds. Later in the summer, the department said it will begin withholding up to 15% of the defaulted borrowers’ income.
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